The Indian jewellery sector is currently awaiting the 2024-25 Budget, with hopes for duty cuts on gold, silver, diamonds, and platinum. Finance Minister Nirmala Sitharaman will present the budget on July 23, and the industry expects these changes to align with the wedding and festival season.
Surendra Mehta, Secretary of the India Bullion and Jewellers Association (IBJA), has expressed concerns about the current duty structure, noting its complexities and inefficiencies. He pointed out that varying duty rates on gold and silver imports from different countries cause market distortions that need to be addressed.
Simplifying Import Duties
Mehta highlighted discrepancies in duty rates under different agreements. For example, the Comprehensive Economic Partnership Agreement (CEPA) with the UAE imposes an 8% duty on silver, while silver imported from LBMA (London Bullion Market Association) certified sources faces a 15% duty. “A reduction in duty by 2-3%, or even 5%, for both gold and silver could significantly benefit jewellery companies,” he stated. This change would help level the playing field among jewellers and bullion dealers and improve price discovery in the India International Bullion Exchange.
Taxation Policy Reforms
Mehta also pointed out the need for changes in taxation policy. He suggested reducing the income tax on interest from sovereign gold bonds, arguing that the current 2.5% interest rate is relatively low and removing the tax could encourage senior citizens to invest in these bonds. Additionally, Mehta advocated for the removal of capital gains tax on the sale of gold and jewellery, which could potentially unlock a significant amount of household gold, estimated between 25,000 to 30,000 tonnes, and reduce the need for gold imports, thereby saving foreign exchange.
Streamlining Regulatory Framework
The jewellery industry faces regulatory challenges due to the involvement of multiple regulators, including the Reserve Bank of India (RBI), the Commerce Ministry, and the Finance Ministry. Mehta proposed that a single regulator, such as the India International Financial Services Centre Authority (IFSCA), could streamline processes and provide more consistent and effective regulation. He praised the IFSCA’s performance, suggesting that consolidating regulatory authority under this body could benefit the industry.
Implications for the Jewellery Industry
If these proposed reforms are implemented, the jewellery industry could experience a more efficient and equitable market, with reduced operational complexities and improved investment incentives. The anticipated duty cuts and tax reforms could lower costs for jewellers, leading to better pricing for consumers and increased demand during the peak wedding and festival seasons. Streamlining the regulatory framework could simplify operations, making it easier for jewellers to navigate the market and comply with regulations.
